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Ether price is up today as interest in the spot ETH ETF in Hong Kong and investors’ expectation of a looser monetary policy in the U.S. boosted sentiment.
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The price of Ether (ETH) regained some of its losses on May 2 following a 14.2% decline from April 28 to May 1, which bottomed out at $2,817. This downturn caused $162 million in leveraged long liquidations. However, a subsequent 6.4% rise between May 1 and May 2 saw Ether’s price approach the $3,000 mark.
Strong spot Ethereum ETF launch in Hong Kong despite weaker macroeconomic conditions
The cryptocurrency market downturn can be largely attributed to deteriorating macroeconomic conditions. These include persistent inflation in the United States and a lower-than-expected 1.6% growth in the first quarter. In Asia, the Bank of Japan intervened several times to stem the depreciation of the yen, while the Eurozone reported a modest 0.4% annual growth in gross domestic product.
Ether’s value suffered as traders grew more risk-averse, though this sentiment also affected various other asset classes. For instance, WTI oil prices dipped to their lowest in over 50 days at $78.18 on May 2. Additionally, other commodities such as copper and wheat saw declines of 4.4% and 3.2%, respectively since April 29.
The cryptocurrency sector took a significant hit with the first-ever net outflows from the BlackRock Bitcoin spot exchange-traded fund (ETF) on May 1, particularly as total spot Bitcoin (BTC) ETFs witnessed a net outflow of $1.2 billion over the six trading days starting April 24.
This lack of interest from institutional investors is particularly troubling as the deadline for the U.S. Securities and Exchange Commission (SEC) to decide on the spot Ethereum ETFs looms, with a final decision due by May 23 on the VanEck Ethereum ETF requests.
Despite the faltering demand for U.S. spot Bitcoin ETFs, Hong Kong launched its own spot cryptocurrency instruments on April 30. On the first trading day, the spot Ethereum ETFs saw net inflows of $44 million, indicating a demand for these products. Although the volume was relatively small, it’s important to note that Hong Kong’s ETF market is significantly smaller than that of the U.S.
Ethereum network activity surges, and investors respond to the FOMC
The increase in Ethereum network activity is a key factor in improving market sentiment and bolstering the support level at $2,800.
Top blockchains ranked by 7-day DApps volumes. Source: DappRadar
On a weekly basis, the volume of decentralized applications (DApps) on Ethereum increased by 15% to $42.2 billion. In contrast, BNB Chain saw a 20% decrease, and Solana experienced a 6.5% contraction in the same period. Highlights for Ethereum DApps included a 31% increase for Balancer, 21% for Curve, and a significant 57% rise for Dodo.
In terms of DApps engagement measured by the number of active addresses, Ethereum also excelled with a 29% surge over seven days. Conversely, its competitors, BNB Chain and Solana, saw declines of 13% and 14.5% respectively during the same timeframe. Notably, Ethereum network’s user growth was primarily concentrated in applications such as Xterio, EigenLayer, and Zerion.
Related: Bitcoin’s dominance ‘likely peaked’ as altcoins ’start to wake up’ — Analyst
Ether’s price also benefited from comments from the U.S. Federal Reserve Chair Jerome Powell after the conclusion of the two-day monetary council meeting on May 1. Powell indicated that interest rates have likely reached their peak at 5.5%, which generally supports risk-on investments like cryptocurrencies.
While it could be a matter of a few months, possibly extending into the first half of 2025, investors are confident that the Fed will begin to lower interest rates.
Eventually, the appeal of fixed-income investments is expected to diminish relative to inflation, pushing the market toward riskier asset classes. For now, Ether investors are relieved that the most intense phase of the central bank’s liquidity tightening appears to be behind them.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
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